Kennedy: Bank at the post office

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The post as a pseudo bank branch? Where did this weird idea come from?

History and necessity, it seems.

The concept made headlines earlier this month as the U.S. Postal Service recognized a pilot that quietly launched in mid-September in four communities to gauge interest: the Bronx, Baltimore, Washington, DC and Falls. Church, Virginia.

There, customers can cash paychecks or business checks up to $ 500, turning them into Visa gift cards that can be used to purchase goods or withdraw money from an ATM.

The goal is to provide an alternative option for “unbanked” or “unbanked” Americans – those without a bank account who tend to use expensive alternatives such as payday loans and payday loans. cashing checks to meet their financial needs.

In 2019, 7 million American households were unbanked, according to the latest Federal Deposit Insurance Corp. survey, compared to 124 million households with at least one bank or credit union account.

That 5.4% unbanked rate was a record high in biennial surveys conducted over the past decade, the FDIC said. But in a postscript, the agency expressed fears the rate might be higher in the next inquiry due to the beating workers suffered as the economy came to a halt at the start of the coronavirus pandemic. .

Supporters of postal banking note that post offices already offer money orders and wire transfers. And from 1911 to 1967, as part of the Postal Savings System, post offices accepted savings deposits from customers, much of which was then redeposited in local banks to generate interest for the system. (Overseas, banking through a post office is common.)

Meanwhile, a University of Michigan study in May noted that about 25% of census tracts nationwide with a local post office also do not have a bank branch or credit union – which means that the postal service’s network of 31,000 retail outlets could provide easy access for the unbanked.

US Senator Kirsten Gillibrand (D-NY) has tried for several years to create a “postal bank” to provide basic financial services while generating new revenue for the money-losing postal service.

Responding to the announcement of the pilot project at four sites, she hailed the idea as “an important first step” in a press release, but noted that the postal banking law she proposed the year last with Senator Bernie Sanders (I-VT) would be more extensive in the types of services offered.

The legislation would establish a non-profit bank to allow the Postal Service to offer low-cost checking and savings accounts, ATMs, mobile banking and low-interest loans, all without the participation of an established financial institution.

Postal banking is an elegant solution to a complex problem – not only will it help the unbanked and underbanked, but it would generate up to $ 9 billion a year for the USPS [U.S. Postal Service], helping to consolidate its finances, ”she said.

Marlene kennedy is a freelance columnist. The opinions expressed in his column are his own and not necessarily those of the newspaper. Reach her at [email protected]

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